Coke admits massaging BK figures

Coca-Cola​ is the latest US company to admit less-than-honest business practices, although it has denied a number of other serious allegations made against it.

Back in April this year, the company was accused of fraud and discrimination by a former employee, Matthew Whitley. He claimed that the company's US fountain division had acted fraudulently by shifting $4 million in capital funding to the iFountain Internet marketing project last year, that it had incorrectly classified marketing allowances and that it discriminated against minorities and women.

But an internal audit carried out by Coca-Cola to investigate the allegations found no evidence to support most of them, the company said yesterday, although it did concede that that there had been accounting irregularities relating to its failed Frozen Coke promotion in Burger King outlets across the US.

Whitley had alleged that Coca-Cola employees had massaged the figures from a 'Fire and Ice' promotion carried out in a Burger King fast food outlet in Richmond, Virginia, in order to persuade the restaurant chain to expand the programme to its other outlets.

The 'Fire and Ice' marketing promotion featured a combination of spicy chicken and Frozen Coke, and Whitley alleged that the Coca-Cola team responsible for the programme had hired an outside 'consultant' to spend up to $10,000 on the meal combination. This in turn prompted Burger King to spend more than $65 million on new fountain dispensing equipment before the Frozen Coke brand was eventually pulled from the chain.

While the company conceded that the figures were massaged at the Richmond store, it did not agree that this had in fact influenced Burger King's decision to invest in the Frozen Coke programme. The programme was launched as a result of tests carried out in other cities in 1998, and that the restaurant chain had agreed to roll it out in all of its stores in 1999. The Richmond trial was carried out in March 2000, by which time 75 per cent of BK outlets were already carrying Frozen Coke, the company said.

The Atlanta-based soft drinks group will take a charge of $9 million relating to the overvaluing of the fountain dispensing equipment, which is said would not be financially significant to earnings. But the fraud has also attracted the interest of the Securities and Exchange Commission, which has called for documents related to the allegations. Coke said it would co-operate fully with the SEC investigations.

But this is not the end of the affair. The internal audit only investigated Whitley's initial allegations, and further claims made by the former employee concerning a number of other allegedly fraudulent activities are yet to be investigated. These include the suggestion that the company pushed concentrate on to delivery trucks just before the end of each quarter to boost sales figures.

Coca-Cola said it would also fight these additional investigations.